What is Intraday Trading?
Intraday trading means the buying and selling of stocks on the same day before the market closes. If a person fails to close their position within the day, it will be squared-off by their stockbroker. The main objective of intraday is to make profits in the very short term. Day trading is capitalizing on price movements in the market during the same day. Intraday traders take positions and make the best of the price movements within the day.
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An intraday 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 for a day trader to make a profit. 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.
Basics of intraday trading
Day Trading refers to the buying and selling of stocks within the same day. It is done with the help of online trading platforms. If a person purchases stocks for a company, then he has to select 'intraday' in the trading platform. Intraday trading is quite popular in the stock market, and one must be well-versed in the basics of intraday trading before taking a plunge. The most important thing you need to understand is that it involves having a view of the trend and taking a position accordingly. Having a view on the trend means you form a view of whether the stock prices will go up or down within a certain time frame. When you have a view that the prices will go up, then you take a long position, meaning you place a buy order. When you have a view that the prices will go down, then you take a short position, meaning you place a sell order. It is mandated by SEBI to square-off, that is, settle your position by the end of the market hours or else it will be automatically done by your broker.
Example to understand Intraday:
A share's price is Rs. 10, and you took a long position with a buy order of 1000 shares, which is a total order size of Rs.10,000. At 3:00 P.M. the share's price is trending at Rs. 11. You would like to settle your trade for a profit of Rs. 1000 for the day.
Key Features of Intraday Trading are:
- It is a separate category of trading and does not involve the delivery of shares into Demat account.
- The trade needs to be settled on the same market day.
- Leverage is provided by your broker depending on the SEBI guidelines.As there is leverage involved, small price fluctuations can lead to higher movements in your invested capital.
- Intraday trading requires researching the stocks you want to take position on, studying the chart closely with indicators, making your own strategy, and including a stop-loss to prevent heavy losses.
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:
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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.
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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.
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 an overbought condition; an RSI value below 20 suggests an oversold condition. There's a rise in the index when the price of the stock rises and vice-versa.
Let's take a look at the formula for RSI calculation:
RSI = 100 – [100 / ( 1 + (Average of Upward Price Change / Average of Downward Price Change ))]
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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
- 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.
- 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.
- 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.
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The ownership of shares is transferred in delivery trading and not in day trading.
What are the brokerage charges for intraday?
Bajaj Financial Securities Limited (BFSL)offers you the benefit of low brokerage rates for intraday trading. Through affordable subscription plans, you can trade at a flat fee and save a lot on brokerage. With BFSL, brokerages go as low as Rs. 5 per order flat for all segments of trading: Intraday, Futures and Options and Delivery.
Brokerage charges for Day trading for the 3 subscription packs offered by BFSL
| Subscription packs from BFSL |
Equity Intraday trading brokerage |
| Freedom Pack |
₹ 20 / order |
| Professional Pack |
₹ 10 / order |
| Bajaj Privilege Club |
₹ 5 / order |
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Disclaimer: Investment in securities market are subject to market risk, read all related documents carefully before investing. Brokerage will not exceed the SEBI prescribed limit. All leveraged intraday positions will be squared off the same day. There is no restriction on the withdrawal of unutilized margin amount.
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Advantages and Disadvantages (Pros and Cons) of Intraday Trading
Advantages of Intraday Trading:
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If trade turns favorable, one can make profit in a very short interval of time.
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Intraday Trading increases the market knowledge for people who wants to gain experience in trading.
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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 of Intraday Trading:
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There is insufficient time span to see increase in profit for a position, since position must be squared-off within the day.
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Ownership of share is not transferred to the trader.
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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 the 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.
- Other than volume and liquidity, it would be advisable if you purchased a stock that has a high correlation with a reputed stock exchange's benchmark index.
- Intraday investors can track the trade volume index of a specific share to study price fluctuations. If there's a rise in the trade volume index, then it means that there's either excessive demand or supply, that can help take positions in intraday trades.
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!