Intraday trading

Intraday trading is also known as Day trading. There are normally three ways to trade financial markets i.e. Long term investing, Swing Trading and Intraday Trading.

In Long term investing and swing trading, traders need to carry on their trading positions overnight while in intraday trading, all the trading positions are squared off at the end of the day.





Day trading is the most difficult of all the trading methods. It is very important for a novice trader to learn all the basics of day trading before trading in the live markets.

Due to advancement in technologies, it is very easier for a trader to do intraday trading from his home using online brokerage services. Now, it is very easy to open a trading account and do day trading.





    What is Intraday Trading?

    Intraday Trading is a form of trading the financial markets in which Buying and Selling of security are completed on the same trading day. The main goal of the day trader is to make a profit from short term trading moves from the price of the security.

    Like for example, if you buy the 100 shares of TCS at 2400 bucks and sold them on the same day for 2450 bucks. By doing this trade, you made the profit of 5000 bucks with a few hours. You didn't have to carry your position overnight.

    What is Intraday Trading?


    Intraday trading is very famous among the new traders because it is very fascinating for the trader to book profit in stock within a day and not to worry about the overnight risks.




    Intraday trading is generally considered a form of speculation. Hence, the day traders are generally referred to as speculators. The principles of Intraday trading are absolutely different from the principles of long term investing.

    Intraday trading is the toughest trading methodology for a trader because lots of experience is needed to make consistent profits from intraday trading. 

    If we compare Long term investing and Intraday trading, Long term investing is like driving a car at the speed of 30 km/hr while Intraday trading is like a driving a formula 1 car at the speed of 400 km/hr. Therefore, it is very tough for beginners to make profits from Intraday trading on a regular basis.

    If you think that the stock is bearish, you can sell the stocks in intraday trading even if you don't have them and you can cover them back(buy them back at the end of the day) while you can't do this in long term investing.


    Basics of Intraday Trading

    To master in any field, you need to know the basics of that field. Intraday trading has some basic concepts that must be cleared before trading the live markets:

    Basic Terminologies of Day trading

    There are numerous terminologies used which you must know before trading the securities using intraday trading. The major terminologies are given below:

    Basic Terminologies for Intraday trading

    Spread

    The difference between the bid price and the ask price is known as the spread. The larger the spread is, the better to stay away from that stock because that stock is not liquid enough to trade. 

    Long

    When you buy stocks, it is referred to as the "long" position. This terminology is also used in trading futures markets. 

    Short

    When you sell the stocks(without owning them), it is referred to as the "short" position. In this position, you suppose that stock will go down in value and you will buy back that stock in a lower value to make profits.

    During short selling, you must cover the position before the closing of the market, otherwise, your positions will go in the auction, you will suffer a huge loss. 

    When you buy stocks, they automatically get squared off at the end of the market, but when you short sell the stocks, they will not be automatically get squared off.

    Leverage rate

    When your broker offers loans for buying more stocks that you can't afford as per your present account limit, it is called leverage. You can maximize your profits by using leverage but you can lose more money as well.


    Float

    The total number of shares are available to trade are known as float shares. This value may vary with time. 

    Beta

    Beta is a numeric value that determines the fluctuation i.e. change in the value of a stock against the relative change in the market index.

     Square off meaning

    When a day trader reverses the trading positions i.e. if day trader has bought some stocks when he will sell those stocks, it will be called Square off.  If a day trader has sold some stocks and when he will buy back those stocks, it will be called Square off.

    Profit/Loss Ratio

    This is the ration of the number of wins to the number of losses. When its value is greater than 1, the trading system is considered profitable and when it is less than 1 like 0.8, the trading system is not profitable.



    Knowledge about the market

    Before trading in any market, you must know the basic knowledge and experience of that particular market. Every market like the stock market, forex, commodities, futures, cryptocurrency etc. have different nature. Therefore, you must get familiar with the market that you want to trade.


    Strategy and Plan

    You must create a proper strategy and plan before trading the live markets. There are tons of strategies out there to make money in the market, you need to choose that strategy which satisfies your risk appetite and your nature as well. 


    Discipline in Intraday Trading

    This is the most important factor which separates the winners from the losers. When you have a great strategy, you must follow it with proper discipline, otherwise, you won't be able to make consistent money by the intraday trading.

     

    How to do Intraday trading for beginners in 2022

    More and more people are showing a huge interest in trading and they are joining various markets like the stock market, forex, commodities etc. They are especially inclined to Intraday trading than long term investing. 




    So it very important for the beginners to get the right guidance in order to make profits from the market. If you won't get the right guidance, it will be impossible for you to make money in the markets by intraday trading.




    There is not any official institute or college which teaches you intraday trading but there are various sources available on the internet where you can get a piece of good knowledge about day trading. 

    Here is the list of few steps which will help you get started for the intraday trading:


    How to do Intraday trading for beginners

    1. Start off 

    First of all, you have to get experience in intraday trading. For this, you can do paper trading or demo trading. There are so many demo trading websites and android apps available where you can do intraday trading without the real money. 

    With the help of demo trading, you will get to know how the market works, how the orders get placed and many more things. Money Bhai is a very popular demo trading website. 


    2. Make a plan

    A good intraday trading plan includes proper entry, exit and stop-loss levels. You must decide the entry, exit and stop-loss of a trade before making the actual trade. A proper testable and verified trading plan is very essential for intraday trading.


    3. Select some stocks

    Choose some stocks that have good volume and liquidity. Choose those stocks which satisfy your trading strategy. Starting making some small trades so that you will get familiar with the real-time intraday market conditions. Practise some trades and analyse their results. 

    Don't choose so many stocks for intraday trading because it will be difficult for you to manage them properly. Don't choose more than 5 stocks for the analysis. 


    4. Avoid Market Noise

    There is a lot of noise and rumours going on in the market. You don't have place trades based on those rumours. Ignore these rumours and always trade according to your plan with strict discipline. 


    5. Volatile market conditions

    Where there is a lot of volatility in the market due to some event, news, disaster, war etc. it is advisable to stop trading in these sort of conditions because the market makes wild moves during these conditions and you may suffer a huge loss. 



    Best Intraday Trading Strategies

    There are numerous intraday trading strategies or techniques. It all depends on your nature and risk appetite of what you choose. It is very confusing for new traders to select the right strategy. Every trading strategy is profitable, it all depends on your discipline that how will a particular strategy perform for you in the markets. 




    It is advisable to focus on just one strategy or trading style for getting better results from the stock market. If you will try to focus more than 1 strategy at a time, you won't be able to trade profitably. Here is the list of some popular trading strategies: 

    1. New Trading: This is the most common form of Day trading. Many people usually buy a stock or commodity etc. on good news and they short sell a stock on bad news. 

    But the Stock market doesn't react in the same way every time, so you have to be very careful before making trading decisions on the basis of news. 

    You can make a good amount of money with news trading but you can face loss as well because the market tends to be very volatile when there is particular news. 

    2. Range Trading: When the market ranges between two levels or areas, it gets rises at the support and it falls back at the resistance level or zone. This is a very simple strategy because you just have to sell at the resistance and buy at the support zone. 

    Range Trading is a little bit difficult because you don't know when that range will be broken. So, always try to trade with strict stop loss. It seems very simple to sell at the resistance and buy at the support, but it is very difficult to execute this. 





    3. Price Action Trading: This technique of trading revolves around the chart patterns, volume, candlestick patterns and many other technical tools other than technical indicators to make trading decisions. 

    This is the simplest form of trading because it doesn't require many different things to consider before making trading decisions. You need to remember very chart and candlestick patterns for the price action trading. But it takes a lot of time and experiences the Price action trading. 

    4. Scalping: In this trading strategy, traders try to capture the spread between the bid-ask price. Traders make a large number of traders very quickly during the day to make money with this trading strategy. 

    The basic ideology of the traders is to take advantage of increasing market volatility and capture those large gaps between bid-ask spreads.

    5. Trend Trading: With the help of technical charts and technical indicators, traders try to find the trend of a security. Trend traders try to ride the trend until it reverses. But you have to identify trends on lower time frames like 5-min for Intraday trading.

    When a stock is making higher highs and higher lows on the chart, it is said to be in an uptrend. The Uptrend continues until it starts making lower highs and lower lows. In this condition, traders make long positions.

    When a stock is making lower highs and lower lows on the chart, it is said to be in a downtrend. The Downtrend continues until it starts making higher highs and higher lows. In this condition, traders make short positions. 

    6. Automated Trading: Automated trading has different names like High-Frequency Trading, Algorithmic trading, Artificial Intelligence based Trading. In this technique, trading is based on writing algorithms and the trades are made by computers. 

    In this trading, you need a system which is a little bit costly for the beginners. This Technique is mainly used by institutional investors like banks, hedge funds etc. 


    Intraday Trading Indicators

    There are hundreds of technical indicators available in the market for identifying the market trend, momentum, Relative strength, direction, volatility etc. You can't use all the technical indicators at the same time, So you have to choose some best and useful indicators. 



    Trading solely on the basis of indicators is risky, so you have to combine the indicators with some other technical tools. When you combine the technical indicators with the chart patterns, candlestick patterns, Support and Resistance levels and other many technical factors, your probability of successful trades increases.

    Some of the major Indicators which you can use in intraday trading are given below:

    1. Relative Strength Indicator(RSI): This indicator is basically used to measure the momentum of the stock whether it is overbought and oversold. This is one of the widely used indicators used in Intraday Trading.

    For Intraday trading, you can choose the timeframe of 15 min, 5min etc. After choosing the timeframe, select the RSI indicator from the toolbox.

    The value of RSI ranges from 0 to 100. If the value of RSI is above 70, the market is considered overbought and the bullish momentum is fading away. If the value of RSI is below 30, the market is considered oversold and the bearish momentum is fading away.

    2. Moving Averages: Moving average is used to identify the trend of the market. Moving average is basically a line on the technical chart which is made up of by joining the average closing prices over a particular period.

    For Intraday trading, you can apply the moving average on 5 min timeframe. You can set moving averages of various periods like 20, 50, 100, 200 etc.

    If a lower period moving average line goes above the higher period moving average line, it indicates the bullish trend. If the higher period moving average line goes above the lower period moving average line, it indicates a bearish trend.

    Intraday Trading Indicators

    3. Average Directional Index(ADX): This indicator is one of the most popular indicators which is used to determine the strength of the trend. The value of the ADX indicator ranges from 0 to 100.

    When the value of ADX falls below 20, the trend gets weaken and when the value of the ADX goes above 50, it indicates a strong trend.

    4. Bollinger Bands: Bollinger Bands have three lines i.e. lower limit line, moving average and the upper limit line. This indicator basically shows how the price decreases or increases as compared to its average value.

    If the stock price has crossed the lower limit line of Bollinger Band, it indicates that the stock price is going to rally in future and if the stock price has crossed the upper limit of the Bollinger Band, it indicates that the stock price is going to fall in future.



    How to select stocks for Intraday trading

    The stock selection is the most important part of getting success in Intraday trading. If you will not choose the right stock, it will be very difficult for you to make consistent profits in intraday trading. Some of the tips for the selection of the right stocks are given below:

    How to select stocks for Intraday trading


    1. Do Proper Research: It is very important for you to do proper research of the sector whose stocks that you want to trade. Most people just pick random stocks for intraday trading, they suffer losses. You have to do the research of the stocks before the trading day.

    You must check the present trend of the stock, momentum of the stock, related news and many more things before placing the trade.

    2. Stay away from the volatile stocks: For Intraday trading, Don't select those stocks which are very volatile and show wild moves. Many amateur traders fall in greed and start trading volatile stocks but they face huge losses because they can't handle volatility.

    It is very tough to set stop-loss levels on the volatile stocks and they often cut stop-loss levels. These types of stocks get manipulated also. Therefore it is necessary to stay away from volatile stocks to trade safely.



    3. Choose Liquid Stocks: The stocks which have a very large volume and the buyers and sellers are always there to make positions are called liquid stocks. The more liquid the stock is, the better it will perform in intraday trading.

    In liquid stocks, you can easily make entries and exits at your desired price due to large volume. The bid-ask spread of these stocks is also very short. You can also trade huge quantities in these stocks anytime because there are always many buyers and sellers are present.

    4. Sector followers: There are some stocks which follow their respective sectors. When the sector is in an uptrend, the stock will show bullish moves and when the sector is in a downtrend, the stocks also show bearish moves.

    When the stocks follow their sectors, it is easy to predict their moves as compared to those stocks which don't follow their sector.

    If you choose those stocks which do not follow their sectors, it will be difficult for you to identify their trend and you will not be able to make consistent profits.



    Best Books for Intraday Trading

    There are so many great books available to learn intraday trading for the beginners. You can get a great piece of knowledge about Intraday trading from these books. Some major intraday trading books are given below:

    Best Books for Intraday Trading

    1. Mastering the Trade by John Carter

    John Carter has written a phenomenal book on day trading. This book will make you understand various strategies working in different markets and over the different markets like forex, stock market etc. 

    This book is one of the best book ever written for Intraday trading. This book clears all the basic concepts of day trading and it also helps you to make the right psychology necessary for intraday trading. 



    2. The Truth About Day Trading by Josh DiPietro

    This book helps you to clear all the doubts and rumours regarding intraday trading. The main emphasis of this book is that "Intraday trading is not get rich quick scheme".

    Many people enter into the stock market and especially in intraday trading with the wrong mindset and unrealistic expectations. This book will help you to pursue intraday trading as a business and in the right manner. 



    3. A beginner's Guide to Day trading Online by Toni Turner

    Toni Turner has written a wonderful book for beginners to get great knowledge about Intraday trading. This book covers all the necessary topics like Risk Management, Strategies, Psychology and much more. 

    This book clearly shows how Intrading trading is different from long term trading and swing trading. This book is very interactive as it contains lot of quizzes and checklists for the better engagement of the reader. 



    4. Day Trading for Dummies by Ann C Logue

    Ann C Logue has explained the various important topics related to intraday trading in a very easy language. This book has a complete guide for beginners to learn about intraday trading in a detailed way.

    This book will guide you to how to choose a stock for trading, risk management, trading psychology, handling a trading position etc. 




    5. The Stock Trader: How I make living trading stocks by Tony Oz

    Tony Oz shares different strategies and techniques that you can use to make a good profit from the markets by intraday trading if you follow them with strict discipline. 

    Tony Oz has shared various important indicators, patterns, strategies, risk management tips etc. to make your intraday trading successful. 

    Best Intraday Trading Platforms

    It doesn't matter how great trading strategy you have if you don't have a good trading platform, you will not able to execute your trading plan. 

    Due to advancement in technologies, most people have stopped working with the offline brokerage houses. Nowadays, most traders trade with online trading platforms.

    Best Intraday Trading Platforms

    Some trading platforms provide trading in various market segments like stocks, commodities, Mutual funds, F&O, forex etc. 

    Here is the list of some great and trusted trading platforms by which you can start intraday trading:

    1. Angel Broking: Angel broking is one of the best trading platforms in India. You can trade in various segments like stocks, commodities, mutual funds etc. You can trade directly with their website and they have a mobile app as well. 

    They also, provide great emails giving stock tips as well. They give an overview of the market conditions at regular intervals. They have a great user interface which is very easy to understand.

    2. Zerodha: Zerodha is one of the most used and trusted discount brokerage of India from the last few years. They have very low brokerage charges and they provide various services. 

    Zerodha provides various market segments to trade like commodities, stocks, Futures and Options etc. They also provide a mobile app by which you can make trades. You can also place trades with the website of Zerodha as well.

    Zerodha provides a great charting platform as well. You can apply various technical indicators and tools with the help of their trading platform. 

    3. Coinbase: Coinbase is one of the most reliable and secure trading platforms for trading in various cryptocurrencies like bitcoin, Ethereum, Litecoin, Ripple etc. It is one of the best platforms for intraday trading in cryptocurrencies. 

    They have a great user interface and they also provide a very good charting platform for doing technical analysis on the various cryptocurrency.

    4. IG Group: IG Group is one of the leading trading platforms for forex trading. This trading platform enables you to trade in every currency pair available. You can also trade CFDs with IG Group. 

    This platform does not have minimum account requirement. They also have very low trading brokerage fees. They have an amazing commission model. They also provide a demo account for trading practice.



    Intraday trading accounts

    There are mainly two types of trading accounts for intraday trading. It is very important for you to choose the right type of trading account as per your risk appetite, trading style, psychology, nature etc.

    1. Cash Account: In this type of trading account, you can only trade with the capital that you have. You can't take leverage on this type of trading account. It minimises your profit potential because you can't take loan or leverage on the trading account. 

    The biggest advantage of this type of trading account is that your loss is also minimised because if you will take leverage, the losses will also be larger. 

    2. Margin Account: In this type of trading account, your broker can lend your extra money to make intraday positions. This can maximise your profit potential. For example, if you have 10,000 bucks in your trading account, you can still do trading up to many times like 20k, 50k etc. 

    Some brokerage houses can give you 40 times of trading limit i.e. if you have 10,000 bucks, you can do the trading of 400,000 bucks. 

    But the biggest disadvantage of this type of trading account is that your loss will also be maximised. If a stock falls 1% and your trading quantity is 20 times of your trading account, you will suffer a loss of 20% which is very huge.


    Intraday Trading for a living

    If you want to be a full-time intraday trader, you need to treat intraday trading as a business. Intraday trading is a skill just like an engineer, doctor, lawyer etc. so you have to learn intraday trading by giving proper time, energy, hard work and patience.

    Intraday Trading for a living

    The most important hindrance that comes in the intraday trader's life is to control greed and fear. When you will master these two things efficiently, you will be able to make consistent profits.  

    The characteristics of the day traders that trade for a living is given below:

    1. Enough Capital: The intraday traders have enough capital because you will not make 5-10 % daily, so a good trader makes 3-5% return a month. So you must have enough trading capital so that you can maintain your lifestyle. If you must have at least 10,00,000 Rupees in order to make a good living. 

    2. Overall knowledge of market conditions: Day traders do all the preparation on the day before the trading day. They choose their stocks, sectors, entry and exit positions well in advance.

    Intraday traders need all the information about the major events on that particular day. If the events make the market volatile, the intraday traders stay away from the market for that particular day.

    Intraday traders don't trade daily, they take the days off when there are major economic or political events because they protect their trading account first before thinking of any profits. 



    3. Backtesting: Backtesting is the way of checking your existence strategy how it has performed over the past years. If the results are positive, then you should apply that strategy in the real markets. 

    The intraday traders that trade for a living,  do proper backtesting before placing any trades in the markets. 

    4. Technical Analysis: Most of the intraday traders use technical analysis as their trading methodology. They trade on the basis of technical charts and technical indicators. 

    5. Proper equipment: Most of the intraday traders have high quality advanced technical types of equipment like laptops, advanced technical charts, Softwares etc.

    6. Discipline: This is the most common characteristic of profitable intraday traders. Consistently profitable traders don't make trades as per their emotions, they trust their plan and trader according to it.



    Education for Intraday trading

    Success in any field requires proper education. If you start intraday trading before taking proper education, you will suffer a huge loss in the long run. There are no formal college institutions which give the degree of Intraday trading.

    intraday trading education

    Books and internet mediums like blogs, youtube channels, podcasts, communities, Ebooks, audiobooks, online seminars, newsletters etc. will provide you with good learning. 

    After learning from the above sources, the most important thing is practice. The more you will practice, the better you will get. The regular practice will give you proper experience for handling various situations during the trade. 

    There are some mentors which provide you with good support in initial days. They check you when you make a mistake and there are tons of mistake that you gonna make in your initial days. 

    You need to give a lot of time and have a lot of patience to learn intraday trading. But once you learn it, it will be the life long skill will make you never work again and live life freely.



    What is the best time for Intraday trading?

    As far as Indian Stock markets are concerned, stock markets open at 9:15 AM, so let the market get settled for half an hour, the time period between 9:45AM and 10:15 AM is the best time for Intraday trading. 



    The time period between 11:15 AM to 1:00 PM, there is no major movement in the market, so it is not an ideal time to make positions.

     The time period between 1:15 PM to 1:45 PM is the second-best time for Intraday trading. Market show major movement between this time period.




    Is intraday trading profitable?

    If you have the right strategy, experience, discipline, patience, guidance etc. the intraday trading will be profitable for you. Many Intraday traders make a lot of money in the financial markets. 

    To be profitable in Intraday trading, you need to take fast decisions in the changing market conditions which are a little bit tough for a beginner.  

    Making profits from Intraday trading is very difficult but once you learnt this skill, you never have to worry about money for a living.  



    Is it safe to do intraday trading?

    For professionals and experienced traders, Intraday trading is very safe. But for beginners, Intraday trading can be very dangerous. You can lose a lot of money in just one day if you don't pay proper attention. 

    You must use proper stop-losses while you trade, otherwise, you can lose your entire capital in just one day if you are over-leveraged. 

    Always try to trade with less quantity in beginning. When you trade less quantity, you can better control yourself emotionally.



    Is day trading just gambling?

    When you just place random trades without any proper plan, Yes, Intraday trading is gambling. Most People don't have a proper plan when they place a trade-in market, they just place trades on their advice of others, boredom, excitement, greed etc. When you trade with this mindset, the intraday trading is indeed gambling. 

    But when you consider trading as a business and you have a proper plan to make trades, Intraday trading is not gambling, it is just like a profession. 

    But most of the people do intraday trading with gambling mindset and hence they are not profitable. These types of traders make consistent losses in the stock market. 



    Can you get rich from day trading?

    Yes, if you are disciplined trader and invest profits back into the trading with proper planning, you can definitely get rich through intraday trading. You must have a good capital for that, if you have less capital, you can't get rich from the intraday trading. 

    Getting rich from intraday trading is tougher as compared to swing trading and investing. Since one have to take decisions very fast, many people are not able to get rich solely through intraday trading. 



    How much money can I make day trading?

     It all depends on your capital size. The bigger capital size you have, the more money you can make with intraday trading. 

    For example, if you have 1 million bucks in your trading account and if you make 1% return in a day, you will make 10,000 bucks in a day. 

    If you think so, you will make 1000 bucks daily from 10,000 bucks account with using leverage, you are in a wrong place. You will lose your entire capital one day if you use this ideology. This is purely a gambling mindset. 



    Why do most day traders fail?

    Lack of Discipline, avoiding stop-loss, over-leveraging and lack of proper knowledge are the four most common reasons why do day traders fail. These four things separate the losing trader from the winning traders.

    When you will control those above four factors, you will never make a loss in the long run. Most proper are not able to control their emotions, hence they are not able to show proper discipline in intraday trading.



    Why is day trading illegal?

    No, Day trading is completely legal. There is nothing illegal in doing intraday trading unless you are manipulating some specific stocks with lots of capital. 

    If you do intraday trading regularly without manipulating the stock markets, day trading is absolutely legal. There is no question about that.  



    Can I day trade with less than 25k?

    Yes, you can definitely do intraday trading with an amount less than 25k, but then you can't expect big profits. It is very tough to trade less than 25k amount because there are brokerage charges also and after cutting trading commissions, you will be left with very less profit. 

    If you are thinking that you will use leverage for making profits with an amount less than 25k, you are going wrong. You will lose your money in the long run because with large leverage, the losses are also large. 



    Can we use Fundamental Analysis for day trading?

    No, you can't use Fundamental analysis for day trading. Fundamental analysis is used to make decisions for long term investing. Most people use technical analysis for intraday trading. 

    Technical analysis is the best trading methodology to use in intraday trading.