What is Intraday Trading?
Welcome back to Sandy e-learning! In this blog post, we're going to delve into the world of intraday trading. Before we start, here's a quick disclaimer: I am not a SEBI-registered trader. I'm sharing my knowledge based on my experience, so always back-test and gain experience before relying on my teachings. Test it out and see if it works for you.
What is Intraday Trading?
Intraday trading involves buying and selling financial instruments within the same trading day. Unlike investors who hold stocks or futures for the long term, intraday traders capitalize on short-term price movements.
Investor vs. Trader
An investor holds stocks or futures (F&O) for more than one day, often ignoring daily market fluctuations. They invest with a long-term perspective and sell when they achieve their desired profit. On the other hand, a trader buys and sells within the same day, booking profits from short-term price changes. For example, a trader might buy a stock at 9:15 AM and sell it at 9:17 AM for a small percentage profit.
Understanding Intraday Trading
Intraday trading means completing all transactions within the same day. In India, the stock market operates from 9:15 AM to 3:30 PM. Trades must be completed before 3:20 PM to avoid automatic closure by brokers.
Advantages of Intraday Trading
- Profit from Both Rising and Falling Markets: You can buy low and sell high, or sell high and buy low to profit from price movements.
- Leverage: Intraday traders can buy more stocks with less capital due to margin trading. For example, with ₹5,000, you can buy five stocks for delivery trading or up to 25 stocks for intraday trading.
Example
Let's say a stock like Reliance is trading at ₹1,000. If you expect the price to rise by ₹10, you can buy at ₹1,000 and sell at ₹1,010. Conversely, if you expect the price to fall to ₹980, you can sell first and buy later at the lower price, pocketing the difference.
Intraday trading provides opportunities for higher percentage gains compared to holding stocks for delivery. If a stock rises by 1%, the intraday profit might be 5%.