What is Day Trading

Among the various strategies to make profits in the stock market, day trading is a popular strategy where traders open and close their trading positions on the same trading day. Let's understand what is day trading and some of its fundamental characteristics.

  1. Traders may place multiple orders intraday. However, they must square off their positions before the trading day ends.
  2. An order for day trading can be placed in stocks, currencies, commodities, and ETFs (Exchange Traded Funds).
  3. Day traders seek to benefit from the minor price gains arising from volatile markets and constant price fluctuations throughout the day.

Who can do Day Trading?

Day trading technique needs to analyze current market trends promptly to make quick decisions amid rapid price fluctuations. Traders with the skill and expertise in stock market trading can use this strategy to make substantial profits. However, beginners should be cautious while doing day trading.

Let us assume a share currently trades at Rs. 50/share. A trader buys the share at the current price and waits for the price to increase. The stock price rises to Rs. 55/share. The trader gets carried away and hesitates to close their position since the market is going upward. They do not book the profit and prefer to wait some more time. In next five minutes, the stock takes a hit and touches Rs. 35/share. Instead of selling the stock at the opportune time, the trader waited for enhanced returns and, in the end, experienced a considerable loss.

Traders must analyze the entry and exit points to make possible profits from day trading. Tools such as stop loss help traders curtail their losses. Hence, beginners who might get carried away with the market trends or are not proficient with the tools used in the stock markets can get exposed to the risk of making losses.

Who Is a Day Trader?

A day trader has sufficient funds, knowledge, and expertise to trade in the stock markets. Veteran day traders can quickly analyze current market trends and short-term profit potential to take a suitable position. They try to identify situations that can cause sudden upswings or downturns in the share price because it creates a profit-making opportunity. Day traders are typically more active in the stock markets as they repeatedly monitor the news flow for possible opportunities.

Day Trading Stock

Liquid stocks are considered more suitable for day trading as the investor needs to square them off before the market closes. In addition, traders prefer shares with higher volatility as it becomes easier to generate substantial profits from price fluctuations. Day traders avoid illiquid stocks for equity day trading.

How Does Day Trading Work In India?

Day Trading in India includes the following segments: equity, equity Futures & Options (F&O) or derivatives, Currency F&O, and commodity F&O. Stock market investments require investors to hold a Demat and Trading account. A Demat & Trading account is essential for investing in the share market. Day traders must link their trading accounts to their bank accounts to start trading.

Studying the market thoroughly before starting intraday trading is of utmost importance. Observe the market behavior and its movement beforehand to better steer through the volatility, which is intrinsic to the stock market.

Day Trading vs. Regular Trading

Delivery trading is referred to as Regular trading here. Delivery trading requires the transfer of securities from the seller to the buyer. The shares are credited into the buyer’s Demat account, and the cash is transferred into the seller’s ledger after settlement which takes T+2 days, where T is the day of trade.

However, there is no physical delivery of securities associated with day trading since the trader squares off their position on the same day. The trader offsets a buy order with a sell order without the need to take delivery. Regular trading (Delivery Trading) entails a broader time horizon compared to day trading. A major portion of time in the day of a day trader goes into monitoring the stock markets constantly to identify profit potentials and to adjust the trades for curtailing losses. Day traders, therefore, require greater skill and expertise to make timely observations, place trades promptly and make profits.


Day trading offers higher margins so one can take larger positions during the day to day trading. However, day trading involves a specific element of risk and is therefore not recommended for beginners with less awareness. Day traders must select liquid stocks with high volatility for their trades and set stop-loss levels to minimize losses.

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